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Insurer must pay out for damage caused by builder to neighbour’s house, High Court rules

AN insurance company is liable to pay out on a policy taken out by a couple and a construction company over building work which caused damage to a next-door neighbour's home.

Karl and Wendy McKenna had works carried out to their house at 50 Upper Grand Canal Street, Dublin, in 2008, when damage was caused to the home of Ann Stewart who lives at number 52.

The McKennas had an insurance policy with Allianz as had the building company, Kapada Ltd, trading as Homebuilder, of which Mr McKenna was also a director and shareholder.  Kapada has since gone into liquidation.

Ms Stewart's insurers claimed against both the McKennas and Kapada but Allianz repudiated the claim saying, under an exclusion clause, it was not obliged to indemnify either party.  Under the public liabilty section of Kapada's policy, Allianz said it was not liable in relation to fault, defective or incorrect workmanship, and because it had not been given immediate notification of the claim.

The McKennas disputed that Allianz was entitled to avoid the policy and called on Allianz to submit the matter to arbitration.

But the insurance company said that under the terms of the policy, such a dispute referral must be made within 12 months of the claim and, because this was not done, this option was deemed to have been abandoned.

Ms Stewart brought proceedings against the McKennas and Kapada with Allianz as a notice party.

In a High Court ruling on the question of whether the policy was validly assigned against Allianz, Mr Justice Max Barrett found the benefit from Kapada's policy had been validly assigned to the McKennas by its (Kapada's) liquidator on March 23, 2011.

He also said Allianz was mistaken  in its view that referral to an arbitrator was out of time. 

The McKennas were entitled to make a submission to the arbitrator but they may also elect not to do so and can alternatively sue Allianz themselves in the courts.   They cannot however do both, the judge said.

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